Background
To raise finance (a PF loan), a company entered into a share transfer agreement consolidating its dispersed shareholdings in the name of a single person (our client), and completed the entry in the register of shareholders. When conflict arose afterward, the former shareholders who had transferred the shares claimed that "the agreement was a formality" and removed our client as representative director at a shareholders' meeting they convened themselves. Changchun represented our client, the transferee.
The Issue — Who Exercises Shareholder Rights Against the Company?
The former shareholders argued that "the agreement was void as a formality for which no consideration was even paid, so we are the real shareholders." The key question was who — the shareholder on the register or the beneficial shareholder — may exercise voting rights against the company.
How Changchun Helped
Changchun (attorney Donghwan Shin) ① proved on the facts that the share transfer agreement was a valid contract concluded with the parties' definitive intention of putting the business back on its feet; ② emphasized the Supreme Court's principle that shareholder rights against a company are exercised on the basis of the entry in the register of shareholders; and ③ made clear that even where there is a dispute over matters such as non-payment of the price, that is a question of non-performance only, and once the transfer was entered in the register by voluntary intention, an exercise of voting rights by former shareholders no longer on the register is without effect.
The court found for our client with a judgment confirming the non-existence of the shareholders' resolution, holding the former shareholders' resolution ineffective (judgment for our client). The case shows the force of the register of shareholders principle in a control contest. (Outcomes may differ depending on the facts of each matter.)